The hearing on Monday revealed details of a 1986 letter by Sir Antony Duff, who was director-general of the security service at the time.

Mr Altman said the letter reported information from a member of the Westminster establishment that Mr Morrison had a "penchant for small boys". The informant had heard the allegations from two sources and passed the information to the security service.

Further documents obtained by the inquiry from the Cabinet Office and the security service refer to this correspondence.

"Those documents make it clear that neither the security service nor the Cabinet Office took steps to investigate this allegation, nor did they report them to the police," Mr Altman said.

'Extremely serious'

As part of its investigation, the Independent Inquiry into Child Sexual Abuse (IICSA) will examine the role of party whips - who help organise party business and have the role of persuading MPs and peers to vote along party lines.

It will investigate whether any whips became aware of allegations and "tried to turn such allegations to their advantage" to keep party colleagues in line.

Mr Altman said they will look at "whether it is true that the Whips' offices of any party failed to report or, worse, assisted in suppressing allegations or evidence of child sexual abuse".

It will also look at whether the "Westminster establishment sought to influence policing or prosecutors' decisions". There will be evidence on "whether there was a culture whereby people of public prominence were shielded from investigation and their wrongdoing tolerated at the expense of their victims", added Mr Altman.

The way political parties, "in particular the leadership of these parties", reacted to allegations of abuse made against their members will also be looked at.

The case of Mr Morrison is one of the three case studies. Another one will examine how the Liberal Party (now known as the Liberal Democrats) responded to allegations made against late MP Cyril Smith.

The third, most recent, case study will look at Green Party member David Challenor. He was jailed for 22 years last year after being convicted of sexual assault against a 10-year-old girl, the hearing was told. He was allowed to remain an active member of the party while he awaited trial, Mr Altman said.

They are "extremely serious issues", he added, telling the inquiry in central London: "The gravity of these issues in this investigation, we suggest, lies in the fact that they related directly to the alleged conduct of elected representatives."

He said a question by Labour's Tom Watson in the House of Commons in 2012, in which he said there was "clear intelligence suggesting a powerful paedophile network linked to Parliament and No 10", could be seen as the "catalyst for the establishment of this inquiry".

While there have been critics opposed to the work of the inquiry, Mr Altman said it aims to address "outstanding issues of public concern".

The most serious allegations, from a man called Carl Beech - known by the pseudonym Nick at the time he made the claims to protect his identity - are not being considered by the inquiry.

The Westminster part of the inquiry is set to last for three weeks. It is one of 13 strands being considered by the IICSA, which was set up in 2015 amid allegations a paedophile ring once operated in Westminster. Professor Alexis Jay is chairing the inquiry, which covers England and Wales.

Witnesses this month are set to include representatives of MI5, the Metropolitan Police and the Independent Office for Police Conduct.

As part of his opening statement, Mr Altman listed a string of allegations against MPs - without concluding whether they were true or false.

Daniel Janner, speaking outside the inquiry's headquarters, said it would "unjustly trash" the reputations of people like his father as well as Sir Edward Heath and Lord Brittan, adding they "cannot answer back from the grave".

He described it as a "massive, out-of-control waste of money" which was "contrary to the basic principles of British justice".

Allegations involving Lord Janner are to be dealt with during a separate strand of the inquiry.

The inquiry says its Westminster investigation will cover:

allegations of child sexual abuse committed by persons of public prominence associated with Westminster and how these came to light

the findings of relevant investigations

whether there is evidence of conspiracy, cover-up, interference or tolerance in relation to child sexual abuse committed by persons of public prominence associated with Westminster

whether governmental, political and law enforcement institutions were aware and took appropriate steps

whether there are adequate safeguarding and child protection policies in place within political parties, government departments and agencies

One area of inquiry will be the activities of the Paedophile Information Exchange, a campaign group which pushed for sex with children to be legal. There are allegations it had access to Home Office funding.